Macroeconomics (Fourth Edition)
4th Edition
ISBN: 9780393603767
Author: Charles I. Jones
Publisher: W. W. Norton & Company
expand_more
expand_more
format_list_bulleted
Question
Chapter 6.A, Problem 4E
a)
To determine
Graph the behavior of output per person using the ratio scale.
b)
To determine
Explain the changes in the growth rate of output per person over time.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Q5 Suppose in a Solow model, we have the following parameter values: n = 0, s = 0.5, a = 0.3. There
is no growth in the total factor productivity so that A, = A = 1. Moreover, we know that at time 0,
the economy is at a steady state so that k = k, =1. Now imagine that a foreign power invaded this
%3D
country. 1% of the population was killed and another 14% of the population fleeded the country to
avoid violence. Moreover, 15% of capital stocks were destroyed. All of this happens in period t=1.
After that, the war ended and there was no more destruction of capital or loss of population (but the
refugee permanently settled outside of the country and will never return0. What is the growth rate of
per-capita output in period t =4?
Suppose in a Solow model, we have the following parameter values: n = 0, s = 0.2, a = 0.33. There is
no growth in the total factor productivity so that A, = A = 1. Moreover, we know that at time 0, the
economy is at a steady state so that k = k, =1. Now imagine that a deadly pandemic hits the
economy at time t=1. As a result, the population at time t =1 is 10% lower than the population at time
t=0. The pandemic is a one-time shock so that population growth rate remains the same, i.e., from t-2
onward, the population remains the same as the population at time t=1. The total capital stock,
however, is unchanged so that K, Ko. What is the growth rate of per-capita capital in percentage
(rounded to the 2 decimal places, e.g., answer 1.08 if your calculation shows the growth rate is
0.01079) at time t=3 from time t=2?
%3!
an economy is described by the Solow-Swan model with the following variables,
E(t)=1
The saving rate is 0.41 per year.
Labor's share of income is 0.44.
The growth rate of labor efficiency is 0.03 per year.
The growth rate of the labor force is 0.02 per year
Depreciation is 0.09 per year.
calculate the steady-state value of the capital-to-labor ratio, K/L
Enter your answer to two places after the decimal.
Chapter 6 Solutions
Macroeconomics (Fourth Edition)
Knowledge Booster
Similar questions
- The economic growth model(s) of ( ) below can be recognized as an endogenous model. A Slow-Swan model; B Ricardo’s model; C Romer-Lucas model; D Harrod-Domar model; E Aghiot-Howitt model.arrow_forwardSuppose a Solow economy is initially at its steady state k∗, and suddenly is hit by a decrease in the depreciation rate δ, from δ to δ1. This change does not alter any of the other exogenous parameters in the model Depict this situation in a graph What happens to steady state level of capital per capita in this situation? What happens to the level of capital per capita over time? Depict this in a graph and explain intuitively.arrow_forwardConsider an economy with a Cobb-Douglas production function with α = 1/3 that begins in steady state with a growth rate of technological progress of g of 2 percent. Consider what happens when g increases to 3 percent. (a) What is the growth rate of output per worker before the change? What happens to this growth rate in the long run? (b) Perform a growth accounting exercise for the economy, decomposing the growth rate in output per capita into components contributed by capital per capita growth and technology growth. What is the contribution of the change in g to output per capita growth according to this formula? (c) In what sense is the growth accounting result in part b producing a misleading picture of this experiment? Explain why this is the case.arrow_forward
- Consider the Swan-Solow model of economic growth. [Hint: Question (e) below goes beyond the subject matter discussed in the lecture and requires you to think independently.] a) Draw a suitable diagram with a typical Aggregate Production Function in it. b) Draw a typical Investment curve into the diagram. Briefly explain how you came up with the curve and what you need to know to exactly pin it down. c) Draw a typical Depreciation curve into the diagram. Briefly explain how you came up with the curve and what you need to know to exactly pin it down. d) Briefly define the steady state and show it in your diagram. e) It has been argued that corruption affects economic growth (e.g. Mankiw/Taylor, 5th ed., pp. 479-480). Explain which of the curves in your diagram is most plausibly affected by a reduction in corruption in an economy, and what this effect would be. f) Use your diagram to show how the effect that you have identified in part (e) affects the steady state in the model.arrow_forwardQuestion 6: Consider the Swan-Solow model of economic growth. In questions (a)- (d), you are supposed to graphically construct the steady state in this model. In question (e), you will apply the model a) Draw a suitable diagram with a typical Aggregate Production Function in it. b) Draw a typical Investment curve into the diagram. Briefly explain how you came up with the curve and what you need to know to exactly pin it down. c) Draw a typical Depreciation curve into the diagram. Briefly explain how you came up with the curve and what you need to know to exactly pin it down. d) Briefly define the steady state and show it in your diagram. e) A major shift in people's values causes them to save less and spend more as a percentage of their income. Analyse the effects of this change on each of the curves in your diagram, and find the new steady state. Briefly discuss your finding in the context of economic growth.arrow_forwardConsider the model you developed in Question 1, where labor growth at a constant rate. Suppose that F(K, L) = K0.5 L0.5 with d = 0.1, s = 0.2, n = 0.01, and A = 1, and take a period to be a year. Question 2 Part a Determine capital per worker, income per capita, and consumption per capita in the steady state. Question 2 Part b Now, suppose that the economy is initially in the steady state that you calcu- lated in Part a. Then, s increases to 0.4 Question 2 Part b1 Determine capital per worker, income per capita, and consumption per capita in each of the 10 years following increase in the savings rate Question 2 Part b2 Determine capital per worker, income per capita, and consumption per capita in the new steady state. Question 2 Part b3 Discuss your results, in particular, comment on the speed of adjustment to the new steady state after the change in the savings rate, and the paths followed by capital per worker, income per capita, and consumption per capita.arrow_forward
- We have an innovation-based Schumpeterian model in which productivity and aggregate output growth are driven by product improvements, which are driven in turn by spending on Research and Development (R&D). However, as the economy becomes larger, and more technologically advanced, it becomes more complex.arrow_forwardConsistent with the data, the Solow model shows that there is correlation between the population growth rate and real GDP per capita. Selected answer will be automatically saved. For keyboard navigation, press up/down arrow keys to select an answer. a b C a positive a negative zeroarrow_forwardn the endogenous growth model, suppose that there are three possible uses of time. Let u = the fraction of time spent working s = fraction of time spent neither working nor accumulating human capital (unemployment) 1 – u – s = fraction of time spent accumulating human capital If z = 1, b = 5, and the economy begins in period 1 with 100 units of human capital, find the values of Y, H, and Y’ for each of the scenarios below. In this model, does the scenario with the greater human capital accumulation lead to the highest per capita income (Yes/No)? u s H Y H' Y' .7 .05 100 .6 .15 100 .6 .05 100 .5 .10 100 Does the scenario with the greater human capital accumulation lead to the highest per capita income (Yes/No)?arrow_forward
- SOLOW’S MODEL (note: first three questions already been answered by a expert. Only questions 4, 5 and 6 need solutions) Consider following information from China and New Zealand in table: China New Zealand Real per capita GDP growth, 2012-2019 (average %) 6.5% 1.6% Real GDP per capita, 2012 (in constant 2017 USD) 11,169 32,989 Real GDP per capita, 2019 (in constant 2017 USD) 16,655 45,555 Average savings rate, 2012-2019 (% of real GDP) 43.7% 21.4% Capital stock, 2019 (in millions of constant 2017 USD) 14,283,969 409,160 Population (in millions) 1,434 4.8 Population growth (in %) 0.5% 1% Capital depreciation rate (in %) 3% 3% Production function in both economies has following functional form: Yt = A * Kt1/3 * Lt2/3 Where Yt denotes aggregate GDP in period t, Kt is aggregate capital stock, Lt is employment (assumed equal for whole population) and A is total factor productivity. Using information provided…arrow_forwardEconomics Federal minimum wage Increase to fifteen dollars: Analyze the model in the context of one of the growth models (Solow or Romer). Explain how the policy can be thought of in the model and why (Include a graphical). Analyze the results: do the results seem reasonable? Are there things missing in the model that are likely affecting the results?arrow_forwardIn the Romer model, if an economy's share of researchers decreases, there will be A) an immediate decrease in output and output growth will slow. B) an immediate increase in output and output growth will slow. C) an immediate increase in output and output growth will accelerate. D) an immediate decrease in output and output growth will accelerate. E) no change in output but output growth will slow.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Principles of Economics (12th Edition)EconomicsISBN:9780134078779Author:Karl E. Case, Ray C. Fair, Sharon E. OsterPublisher:PEARSON
Engineering Economy (17th Edition)EconomicsISBN:9780134870069Author:William G. Sullivan, Elin M. Wicks, C. Patrick KoellingPublisher:PEARSON
Principles of Economics (MindTap Course List)EconomicsISBN:9781305585126Author:N. Gregory MankiwPublisher:Cengage Learning
Managerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-...EconomicsISBN:9781259290619Author:Michael Baye, Jeff PrincePublisher:McGraw-Hill Education
Principles of Economics (12th Edition)
Economics
ISBN:9780134078779
Author:Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:9780134870069
Author:William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:9781305585126
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-...
Economics
ISBN:9781259290619
Author:Michael Baye, Jeff Prince
Publisher:McGraw-Hill Education